HW-Elasticity of Supply AGBM 102, Spring 2020

Table 1: Supply schedule

for bacon Table 2: Supply schedule for bacon
($/ pound) ($/pound)
Price Quantity PRICE $ QUANTITY
$1.00 4.75 $2.50 10
$2.50 8 $3.75 12.5
$3.75 10.5 $4.00 15
$4.00 13 $5.60 16.5
$5.60 16 $12.25 19

Show all your work to answer the following questions.

1. Using Table 1,
a. Calculate the supply curve if P1= $5.60 and P2= $2.50

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�=�.𝟓𝟓+�.𝟓�P

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b. Show the mathematical check for your derived supply equation using two

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different price points from the supply schedule.
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Q=a+bP ( 16−8 )
b= �=�.𝟓𝟓+�.𝟓�P
( 5.6−2.5 )
a=16− (2.58 x 5.6 )
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( Q 1−Q 2 )
b= a=1.55 �=1.55+ (2.58�5.6)
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( P 1−P 2 ) b= a=8− ( 2.58 x 2.5 ) �=16

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( 3.1 )
a=1.55 �=1.55+ (2.58�2.5)
a=Q−bP
�=8
b=2.58
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c. Calculate the point elasticity of supply using those points on the supply
curve.

(−8 ) −0.50
is

( Q 2−Q 1 ) (8−16) ε=
( 16 ) ( 16 ) −0.55
(Q 1 ) ε=
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ε= ε= (−3.1 )
( P 2−P 1 ) ( 2.5−5.6 ) ε =0.91
( 5.6 ) ( 5.6 )
( P 1)
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d. What does the elasticity that you calculated tell you about supply?

The point elasticity of supply is 0.91, which is greater than zero, and less than one. This
indicates that the demand is inelastic and has a low responsiveness to changes in price, such
that demand does not change more than price does. In this case, for every 1% increase in

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 price, there would be an increase in quantity by 0.91%; on the contrary, for every 1%
decrease in price, there would be a decrease in quantity of 0.91%.

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